Apollo Global Management Inc. is in talks to acquire aerospace-parts maker Arconic Corp. according to sources familiar with the matter. Apollo submitted a bid in February and has debt financing in place for the acquisition. Arconic's advisers have also reached out to other potential buyers, but there is no guarantee that a deal will be reached with any of them. Arconic stock rose nearly 20% to close at $26.44 on Tuesday after the news of Apollo's bid was reported, giving the company a market value of about $2.6 billion and a debt load of more than $1.5 billion. If a deal does happen, it is expected to carry a significant premium.
Arconic, which was separated from the aluminum business that is now called Alcoa in 2016, faced a campaign from activist investor Elliott Investment Management LP, which resulted in the resignation of Arconic's then-CEO, Klaus Kleinfeld, and an overhaul of its board. The company is now run by Timothy Myers, who took the CEO role in 2020. In 2018, Apollo had expressed interest in acquiring Arconic, but a deal never materialized. Arconic then divided into two independent, publicly traded businesses in 2020.
The current acquisition talks come at a muted time for private-equity buyouts, as a tough financing market and a disconnect between buyers and sellers on price have created roadblocks to deals. Private-equity firms have turned to private lenders or put more of their cash into new investments. However, Apollo, which has a large credit arm and over $500 billion in assets under management, has the ability to be creative in the structuring of its deals. The firm recently led the purchase of $900 million in convertible preferred stock of Western Digital Corp., along with Elliott.
Arconic recently reported that its revenue for the fourth quarter of 2022 was $1.9 billion, down 9% from the prior year, and its net loss widened to $273 million from $38 million a year earlier. The company makes parts for the aerospace, automotive, building, and energy industries and is focused on its consumer business, selling R1T pickup trucks and R1S SUVs, as well as its existing contract to sell 100,000 battery-powered delivery vans to Amazon.com Inc.
